And they hate cash because it gives consumers an anonymous payment mechanism.

Let’s explore the animosity to cash.

It’s basically because a cashless society is an easier-to-tax society, as expressed by an editorial from the U.K.-based Financial Times.

…unlike electronic money, it cannot be tracked. That means cash favours anonymous and often illicit activity; its abolition would make life easier for a government set on squeezing the informal economy out of existence. …Value added tax, for example, could be automatically levied. …Greece, in particular, could make lemonade out of lemons, using the current capital controls to push the country’s cash culture into new habits.

Peter Bofinger of the German Council of Economic Experts…wants to abolish the use of cash… He frets that old-fashioned notes enable undeclared work and black markets, and stand in the way of central bank monetary policy. So rather than adjust policy to be more palatable to the public, he’d rather leave no shadows in which the public can hide from his preferred policies. The idea is to make all economic activity visible so that people have to submit to control. Denmark, which has the highest tax rates in Europe and a correspondingly booming shadow economy, is already moving in that direction. …the Danmarks Nationalbank will stop internal printing of banknotes and minting of coins in 2016. After all, why adjust tax and regulatory policy to be acceptable to constitutents when you can nag them and try to reinvent the idea of money instead?

By the way, some have proposed similar policies in the United States, starting with a ban on $100 bills.

Notwithstanding my attempt to be clever, the tide is moving in the wrong direction. Cash is beginning to vanish in Sweden, as reported by the New York Times.

…many of the country’s banks no longer accept or dispense cash. Bills and coins now represent just 2 percent of Sweden’s economy, compared with 7.7 percent in the United States and 10 percent in the euro area. This year, only a fifth of all consumer payments in Sweden have been made in cash, compared with an average of 75 percent in the rest of the world, according to Euromonitor International. …Cash machines, which are controlled by a Swedish bank consortium, are being dismantled by the hundreds

Though the article notes that there is some resistance.

Not everyone is cheering. Sweden’s embrace of electronic payments has alarmed consumer organizations and critics who warn of a rising threat to privacy and increased vulnerability to sophisticated Internet crimes. …The government has not sought to stem the cashless tide. If anything, it has benefited from more efficient tax collection, because electronic transactions leave a trail; in countries like Greece and Italy, where cash is still heavily used, tax evasion remains a big problem. Leif Trogen, an official at the Swedish Bankers’ Association, acknowledged that banks were earning substantial fee income from the cashless revolution.

What matters, by the way, is not the degree to which consumers prefer to use alternatives to cash.

That’s perfectly fine, and it explains much of what we see on this map.

The problem is when governments use coercion to limit and/or abolish cash so that politicians have more power. And (gee, what a surprise) this is why the French are trying to crack down on cash.

France is banning the use of cash for transactions worth more than €1,000…part of a growing movement among academics and now governments to gradually ban the use of cash completely. …it is a “barbarous relic”, as some publications loftily dismiss it. The trouble is, cash is also incredibly efficient. And it is a crucial part of a free society. There is no convincing case for abolition. …When it comes to creeping state control, it is no surprise to find the French out in front. …A cashless economy would be far easier to both tax and control. But hold on. Is that something we really want? In reality, cash is far too valuable to be given up lightly. In truth, the benefits of abolition are largely oversold. While terrorists and criminals may well use cash to buy weapons, or deal in drugs, it is very hard to believe that they would not find some other way of financing their operations if it was abolished. Are there really any cases of potential jihadists being foiled because they couldn’t find two utility bills (less than three months old, of course) in a false name to open an account?

Amen. Banning cash to stop terrorists is about as foolish as thinking that gun control will thwart jihadists.

In any event, we need to consider trade-offs. Chris Giles highlighted that issue in a piece for the Financial Times.

…an unfortunate rhetorical echo of Maoist China. It is illiberal… Some argue there would be beneficial side effects from abolishing notes and coins through the regularisation of illegal activities. Really? …Cash would have to be abolished everywhere and the BoE does not have those powers, thankfully. The anonymity of cash helps to free people from their governments and some criminality is a price worth paying for liberty.

Though I suppose we should grudgingly give politicians credit for cleverly trying exploit fear to expand their power.

But never forget we’re talking about a bad version of clever. If they succeed, that will be bad news for freedom. J.D. Tuccille of Reasonexplains in a second article why a growing number of people prefer to use cash.

Many Americans happily and quietly avoid banks and trendy purchasing choices in favor of old-fashioned paper money. Lots of business gets done that way…the Albuquerque Journal pointed out that over a third of households in the city either avoid banks entirely (the “unbanked”) or else keep a checking account but do much of their business through cash, check-cashing shops, pawn shops, money orders, and other “alternative financial products” (the “underbanked”). A few weeks earlier, the Kansas City Star reported a similar local situation… In both cities, the phenomenon is growing. …Twenty-six percent cite privacy as a reason for keeping clear of banks – bankers say that increased federal reporting and documentation requirements drive many customers away. “A lot of people are afraid of Uncle Sam,” Greg Levenson, president and CEO of Southwest Capital Bank, told the Albuquerque Journal. …It’s a fair bet that those who “have managed to earn income in the shadow economy” and want to keep their income unreported to the feds and undiminished by fees are heavily overrepresented among the unbanked. …most people aren’t idiots. When they avoid expensive, snoopy financial institutions, it’s because they’ve decided the benefits outweigh the costs.

Very well said, though I’d augment what he wrote by noting that some of these folks probably would like to be banked but are deterred by high costs resulting from foolish government money-laundering laws.

More on that later.

Let’s stay with the issue of whether cash should be preserved. A business writer from the U.K. is very uneasy about the notion of a society with no cash.

…tax authorities have become increasingly keen on tracking everything and everyone to make absolutely certain that no assets slip under their radars. The Greeks have been told that, come 2016, they must begin to declare all cash over €15,000 held in safes or mattresses, and all precious stones, gold and the like worth more than €30,000. Anyone else think there might be a new tax coming on all that stuff? …number-crunchers…are maddened by the fact that even as we are provided with lots of simple digital payment methods we still like to use cash: the demand for £20 and £50 notes has been rising. …They are maddened because “as untraceable bearer instruments, it is not possible to locate where banknotes are being held at any one time”… Without recourse to physical cash, we are all 100% dependent on the state-controlled digital world for our financial security. Worse, the end of cash is also the end of privacy: if you have to pay for everything digitally, every transaction you ever make (and your location when you make it) will be on record. Forever. That’s real repression.

She nails it. If politicians get access to more information, they’ll levy more taxes and impose more control.

And that won’t end well.

Last but not least, the Chairman of Signature Bank, Scott Shay, warns about the totalitarian temptations that would exist in a cash-free world. Here’s some of what he wrote in a column for CNBC.

In 2010,VisaandMasterCard, bowed to government pressure — not even federal or state law — and banned all online-betting payments from their systems. This made it virtually impossible for these gambling sites to continue operating regardless of their jurisdiction or legality. It is not too far-fetched to wonder if the day might come when the health records of an overweight individual would lead to a situation in which they find that any sugary drink purchase they make through a credit or debit card is declined. …You might think then that the person can always pay cash and remain outside the purview of these technologies. This may be the case for the moment, but we are well on the road to becoming a cashless society. …there is…a sinister risk…a cashless society would certainly give governments unprecedented access to information and power over citizens.

And, he warns, that information will lead to mischief.

Currently, we have little evidence to indicate that governments will refrain from using this power. On the contrary, the U.S. government is already using its snooping prowess and big-data manipulation in some frightening ways. …the U.S. government is becoming very fond of seizing money from citizens first and asking questions later via “civil forfeiture.” Amazingly, the government is permitted by law to do this even if it is only government staff members who have a suspicion, not proof, of wrongdoing. …In recent years, it made it increasingly difficult for companies to operate or individuals to transact by adding compliance hurdles for banks wishing to deal with certain categories of clients. By making it too expensive to deal with certain clients or sending the signal that a bank should not deal with a particular client or type of client, the government can almost assuredly keep that company or person out of the banking system. Banks are so critically dependent on government regulatory approval for their actions… It is easy to imagine a totalitarian regime using these tools to great harm.

Some folks will read Shay’s piece and downplay his concerns. They’ll say he’s making a slippery slope argument.

But there are very good reasons, when dealing with government, to fear that the slope actually is slippery.

Let’s close by sharing my video on the closely related topic of money laundering. These laws and regulations have been imposed supposedly to fight crime.

I read almost all your posts via email, but this is one of a handful that have prompted me to visit this site itself and give my two cents!

My advice to readers who want to fight against the war on cash:

1. Banning cash is pointless not just because it’s a tough tide to fight in the short run, but also because alternative currencies/mediums of exchange are *way* too easy for gray markets to adopt in response.

People typically get $20 withdrawals from ATMs these days. If cash were banned (or no longer circulated), those bills could easily be replaced with one ounce silver rounds (which are worth about $15 right now) or any other material in high demand.

In fact, barter of *any* kind could easily keep off the books exchanges in full operation. Lots of people in Greece have begun doing this already.

2. Anyone wanting to stem the tide in favor of cash today can do the obvious: use more cash for routine exchanges! If you have a habit of spending at a stable rate every day or week, it’s not that hard to plan ahead to make cash payments almost as convenient as credit/debit.

3. “Time Banking.” Look that up right now 🙂

Any war on currency is doomed to implode on itself if people engage in *that* activity as a result.

—

Like nearly all major government fiscal initiatives, a ban on cash will no doubt adversely affect the poor more than anyone else, and I’m sure anyone reading this blog can easily discern why.

Come, come developed world voter-lemming. Join the 1% growth trendline while world average growth is 4% ( and on an accelerating trendline, to boot). Nothing will happen, nothing will happen, relax,, relax, you are getting sleepy, very sleepy, you need more coercive collectivism. Your fellow citizens are stealing your lunch. They are evading taxes. I’m here to help.

For most of the developed world the voter-lemmings dream is getting closer and closer: One of these days, the citizens of the developed world will devote 50-60-70% of their vitality working for the state — i.e. For the benefit of distant unknowns across neighborhoods, cities, states and countries, rather than for themselves and their families. BUT they will do so with enough enthusiasm to keep their countries in the developed world of the latter twenty first century. I can’t wait! Where do I sign up to serve?

Few countries in today’s developed world will escape. As the situation deteriorates, and these subpar growth countries (realize that anything below the 4% world average growth is subpar -it’s decline), be on watch for the first few countries that drop out of OECD, UN, climate treaties. While they could always regress, such emancipation moves will correlate strongly to those countries that rule prosperity past mid century.

The time has not come yet. Virtually all of the more independently thinking countries currently calculate that retaliation and vindictiveness from the world’s cartels will outweigh any benefits. But as growth divergence entrenches decline and the incentive to break free increases a few countries (and their electorates, of course) will change their calculation and break away. Watch the European Union disintegrate, just like the slow growth Soviet Union did. When growth is subpar, nothing is sustainable. Nothing. It does not matter what the political system. Secular subpar growth is decline and extinction. Evolution, even in the political and ethical domain, is ultimately unstoppable. So choose your evolutional branch carefully, because most branches go extinct with great pain and sacrifice. Few, very few, are successful. Americans happen to be living on one such branch; but taken for granted it’s quickly fading away.

—–

Greece:

As a side note, of all the very bad things that the new delusional (and voter approved) Greek government is doing, the worst is the so called new “net worth registry” where all citizens must declare all assets in a permanent centralized government database. This new step towards totalitarianism, and the new taxes it will undoubtedly enable, will far outlive the petty vindictiveness of the current Greek government, and the majority that elected it.
My more specific prediction: The steady state of Greece will be a “Moussaka Republic”. Greece Will spend many years in that equilibrium before final collapse. This is because Greece has one monopoly asset with few competitors: The Mediterranean geography style tourism. So, at equilibrium, a small proportion of the Greek population will milk international tourists, and the rest of the Greek electorate will try to live off the tourist providers through the political process. A political tourism elite will control the country, just like sheiks, emirs, Chavezes, Putins and ayatollahs control petroleum producing countries.

PS. Interesting how all bloggers, pundits, economists, politicians, are quick to point out the stupidity of voters in other countries but steer clear away from claiming the same about their own country and its electorate. Talk about intimidation of the pitchfork. “Yes, we can!”

anyone who has been to the grocery store lately knows that the 100 dollar bill is the new 20… it would be insane to abolish it… but sanity is not something government officials and politicians do well… if we allow government the unrestricted ability to track our electronic and financial transactions we are headed for big trouble… our press will be less free… {remember granny Clinton’s “enemies list”? ‘the vast right wing conspiracy”? } politicians will regularly invade our privacy… and use personal information for political gain… investigative reporters will find it impossible to protect their sources from government snooping… forget anything approaching a free press…. because it will be stifled by an intrusive and vindictive political class with unlimited access to personal information…. our financial accounts will be hacked by parties unknown… it will become one more government goat frolic… to be exploited by the criminal class… and there will be no benefit to any of it… abolish cash? many of us prefer the idea of cutting spending and shrinking government… let us keep the cash………

[…] That is why governments do not like cash and why there is now a war on cash. In many European nations, cash is on the endangered species list. Cash now makes makes up only 7.7% of the American economy. […]

tried to pay my gas bill at the gas office, had cash in my hand. they refused to take payment unless I gave them my social security number.

tried to deposit cash into my bank account, had to show my drivers license. I asked why, they said it was for security.

tried to buy a sandwich today, waved a 20, they said they only take credit/debit cards.

lookin’ kinda bad. what you wrote about “automatic taxes”, that’s exactly how they’ll do it. type it in, hit enter, done. you had plans for that money, your kid’s birthday party, your retirement, buy a new car … too bad, nothing you can do. the real killer is when tax rates are calculated for the individual. 5% for one person, 10% for another, 50% for the one on the watch list. call the IRS they’ll say, “there’s nothing we can do”, call your representative he’ll say “there’s nothing I can do”, try to do something outside the system and watch SWAT show up, THEY can do something.

This isn’t just criminal, but evil. I no longer put money in the bank. I instead cash my paycheck and deposit just enough to pay bills. I use cash absolutely everywhere I go and people love it. Earlier this year, not once but twice. We could not use the card because of glitches when gassing up.
Both times it was cash only. Not a problem for us as we always use it. Fight back and dont stop fighting back. Even if you get your ass kicked, keep fighting and you will prevail.

I agree that the movement toward eliminating physical cash is a danger to personal liberty in that it moves us 1 more step toward more oversight and control by Big Brother. And such government initiatives should be resisted so as to keep governments out of our financial affairs (and our bedrooms).

The Keynesian argument is even a better reason against electronic money since governmental application of negative interest rates to our cash ‘hoards’ (savings) is unfair, counterproductive, and an admission by central banks that they have entirely failed in their management of monetary policy.
In other words they are just grasping at straws and if they managed to move to electronic money and monitoring of same, they would thereby simply be more effective at wrecking the economy than they had been heretofore.

But IMO it would in any case be shortsighted of governments today to eliminate cash entirely in that our electronic money systems are not yet so hardened that they cannot fail. Governments know that.
And they also know that if they can hack our activity then so can those who would steal from us. In other words if they construct systems to monitor our finances then those systems are also going to be used by thieves. That is why the main software makers and hardware suppliers are moving to encryption that they ostensibly will not share with governments. As Steve Jobs or someone said “if we create a backdoor for the government why would organized crime also not come through that door?” This is all thanks to the Snowden revelations of government snooping that has been going on for some time.

So IMO physical money is a backup to those times when the power goes down as when we have natural or unnatural catastrophes. And there are always going to be places and times that financial transactions need to be done with good old paper money.
Otherwise we would have to use scrip in times like that.
Furthermore most developed nations’ governments are already tracking 99% of all financial transactions since 99% of all transactions are already electronic. And that is because of consumer preference. Most of us are unaware that we are being tracked or don’t care.
There are of course those of us who are ‘hermits’ and there are conspiracy theorists who go off the grid entirely who cannot be tracked for mosr of their financial activity. And there is the black market you mention in one of your posts.

Those who use electronic money by choice include those who use cheques and debit/credit cards. All such transactions are captured today.
Almost all wages and salaries are processed electronically. In my father’s day his wages came as physical cash in an envelope with a statement. No company handles payrolls like that. When was the last time you heard of a payroll heist?

People don’t use physical cash for reasons of convenience and safety. Less likely to get robbed or to lose the cash. And most people like to have their own electronic records of their financial transactions even though many know that this leads to those transactions being thereby monitorible by tax and other government authorities. But I guess we rationalize this to ourselves by saying that we don’t care if governments look over our shoulder as we conduct our business since we are not going to do anything illegal anyways?

The CIA hands out skidfuls of $100 bills to people whose assistance it needs to buy.
For example the warlords in Afghanistan it needed for the former fight against the Taliban.
Putting the same money, electronically, into Swiss or other offshore bank accounts, in the repients’ names, is not always going to be a viable alternative.

[…] class this isn’t a bug, but a feature. Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and […]

[…] class this isn’t a bug, but a feature. Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and […]

[…] class this isn’t a bug, but a feature. Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and […]

[…] class this isn’t a bug, but a feature. Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and […]

[…] class this isn’t a bug, but a feature. Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and […]

[…] class this isn’t a bug, but a feature. Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and […]

[…] class this isn’t a bug, but a feature. Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and […]

[…] class this isn’t a bug, but a feature. Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and […]

[…] to expand the burden of money laundering laws. Some of them want to ban the $100 bill, or perhaps even ban cash entirely. All so government can more closely monitor the private financial choices of innocent […]

[…] P.P.P.P.S. And you won’t be surprised to learn that the statists have learned the wrong lesson. They see that AML laws have been a failure and think the right response is to go nuclear and ban cash entirely. […]